THE BIG PICTURE

President Trump announced last week his decision to end the Deferred Action for Childhood Arrivals (DACA), which will take effect in six months. The delay is to give Congress time to act on the program, which was implemented via Executive Order by President Obama. According to House Speaker Paul Ryan, six months is enough time to work out a legislative solution. House Democrats have threatened to shut down the government in December if action is not taken to protect DREAMers. Fifteen states and the District of Columbia filed suit challenging the Trump administration’s decision to rescind DACA. Additionally, several banking institutions have issued statements opposing the president’s termination of the program.

President Trump on September 6 struck a deal with Democrats that would permit a three-month debt ceiling increase and aid for Hurricane Harvey victims. The Senate passed the measure the next day by a vote of 80-17. White House officials spoke at a GOP conference meeting on September 8 and tried to rally House support from members who were angry that the three-month debt ceiling increase does not include spending cuts. The House then passed the bill by a vote of 316-90. The legislation also included a short-term extension of the National Flood Insurance Program, extending it until December 8. This will give members a chance to work on a compromise. Ranking Member Maxine Waters stressed in a floor statement on September 7 the importance of carrying out a responsible National Flood Insurance Program reauthorization.

Unlikely to move anytime soon is an Obamacare repeal, which Senate Republicans seem to be putting on the back burner. The opportunity to pass a bill by a party-line vote expires at the end of the month, and right now there is not a bill ready to bring to the Senate floor.

Court Denies Trump Administration Effort to Include Extended Family in Travel Ban: The U.S. Court of Appeals for the Ninth Circuit rejected the Trump administration’s attempt to deny an exemption from its travel ban to grandparents, aunts, uncles, and cousins of Americans. The Supreme Court will be holding oral arguments on the overall ban’s legality on October 10.

Department of Treasury Secretary Steven Mnuchin Planning New Sanctions on North Korea: On September 5, Secretary Mnuchin said that he is preparing new economic sanctions against North Korea in response to the country’s latest nuclear test. Mnuchin stated “I am going to draft a sanctions package to send to the president for his strong consideration that anybody that wants to do trade or business with them would be prevented from doing trade or business with us.”

LAST WEEK ON THE HILL

Democratic Senators Urge Treasury Secretary Steven Mnuchin to Oppose Changes to the Volcker Rule: On September 7, Senators Jeff Merkley (D-OR) and Sherrod Brown (D-OH) sent a letter to Treasury Secretary Mnuchin asking that the secretary oppose making amendments to the Volcker Rule. At the direction of the Financial Stability Oversight Council, the five regulators with jurisdiction over the Volcker Rule are examining potential changes.

HOUSE FINANCIAL SERVICES COMMITTEE

Subcommittee Examines Regulatory Legislation: The Financial Institutions and Consumer Credit Subcommittee held a hearing to examine several pieces of legislation that are “aimed at improving the regulatory environment in order to boost economic growth.” According to Subcommittee Chairman Blaine Luetkemeyer (R-MO), “From banks and credit unions to attorneys, we’ve seen an impeded ability for businesses across the nation to offer financial services and guidance.” Witnesses included:

Ms. Anne Fortney, Partner Emerita, Hudson Cook, LLP (TTF) • Mr. Charles Tuggle, Executive Vice President and General Counsel, First Horizon National Corporation (TTF) • Mr. Thomas Quaadman, Executive Vice President, Center for Capital Markets Competitiveness (TTF) • Ms. Chi Chi Wu, Staff Attorney, National Consumer Law Center (TTF)

Legislation considered included:

  • H.R. 1849 (Rep. Trott), the “Practice of Law Technical Clarification Act of 2017”

  • H.R. 2359 (Rep. Loudermilk), the “FCRA Liability Harmonization Act”

  • H.R. 3312 (Rep. Luetkemeyer), the “Systemic Risk Designation Improvement Act of 2017”
  • H.R. ____ (Rep Royce), the "Facilitating Access to Credit Act"
  • H.R. ____ (Rep. Tenney), the “Community Institution Mortgage Relief Act of 2017”
  • H.R. ____ (Rep. Hill), the “TRID Improvement Act of 2017”

Subcommittee Holds Hearing on Terrorist Financing: The Terrorism and Illicit Finance Subcommittee held a hearing entitled “Low Cost, High Impact: Combatting the Financing of Lone-Wolf and Small-Scale Terrorist Attacks.” Subcommittee Chairman Steve Pearce (R-NM) stated that “efforts to combat terrorist financing have traditionally focused on large-scale funding sources; however, small-scale and lone-wolf style attacks have become more common and require significantly less funding.” Witnesses included: • Dr. Matthew Levitt, Director, Stein Program on Counterterrorism and Intelligence, Washington Institute for Near East Policy • Mr. Joseph V. Moreno, Partner, Cadwalader, Wickersham & Taft LLP • Mr. Seamus Hughes, Deputy Director, George Washington University’s Program on Extremism • Mr. Frederick Reynolds, Global Head of Financial Crime, Barclays

Subcommittee Holds Hearing on Financial Industry Regulatory Authority (FINRA): The Capital Markets, Securities, and Investment Subcommittee held a hearing entitled “Oversight of the Financial Industry Regulatory Authority.” The sole witness was Mr. Robert W. Cook, President and Chief Executive Officer of the Financial Industry Regulatory Authority. In his testimony, Cook said that fairness about the way stock trades are carried out is remaining a top priority for FINRA, saying that they have “conducted a sweep in reviewing firms’ best execution practices and [they’re] anticipating doing more examination and surveillance work.”

SENATE BANKING COMMITTEE

Committee Advances Trump Nominees for Fed and Office of Comptroller of the Currency (OCC): On September 7, the Senate Banking Committee voted to advance Randal Quarles, nominee for Federal Reserve Governor, and Joseph Otting, nominee for Comptroller of the Currency. The Committee also advanced a bill that would allow the Financial Stability Oversight Council’s independent insurance expert to stay on up to 18 months after the expiration of his term. The House passed a companion bill on September 5.

Committee Holds Hearing on North Korea Sanctions: Also on September 7, the committee held a hearing entitled “Evaluating Sanctions Enforcement and Policy Options on North Korea.” Main themes of the hearing were how North Korea is funneling money through Chinese banks, the effects that secondary sanctions on Chinese banks would have on the Chinese and international economies, and the importance of handling the situation with diplomacy. The witnesses included: • Mr. Adam Szubin, Distinguished Practitioner in Residence, Strategic Studies, Johns Hopkins University School of Advanced International Studies • Mr. Anthony Ruggiero, Senior Fellow, Foundation for Defense of Democracies • Dr. John Park, Director of the Korea Working Group and Adjunct Lecturer in Public Policy, Harvard Kennedy School

LEGISLATION INTRODUCED AND PROPOSED

Bipartisan Bill to Reclassify Cryptocurrency: Reps. David Schweikert (R-AZ) and Jared Polis (D-CO) introduced a bill that would exempt cryptocurrency transactions of up to $600 from IRS reporting requirements. Currently, cryptocurrency transactions fall under the same category as stock trades. This bill would categorize those transactions similarly to foreign currency transactions.

THIS WEEK ON THE HILL

Tuesday, September 12

House Financial Services Subcommittees on Financial Institutions and Consumer Credit, Monetary Policy and Trade, Joint Hearing, “Examining the Relationship Between Prudential Regulation and Monetary Policy at the Federal Reserve,” 2:00 PM in 2128 Rayburn House Office Building • Dr. Charles Calomiris, Henry Kaufman Professor of Financial Institutions, Columbia Business School, Columbia University • Dr. Stephen G. Cecchetti, Rosen Family Chair in International Finance, Brandeis International Business School, Brandeis University • Mr. Jim Sivon, Partner, Barnett Sivon & Natter P.C., on behalf of the Financial Services Roundtable

Senate Banking Committee, Hearing, “Examining the Fintech Landscape,” 10:00AM, 538 Dirksen Senate Office Building • Mr. Lawrance Evans, Director, Financial Markets, U.S. Government Accountability Office • Mr. Eric Turner, Research Analyst, S&P Global Market Intelligence • Mr. Frank Pasquale, Professor of Law, University of Maryland Francis King Carey School of Law

Wednesday, September 13

House Financial Services Subcommittee on Monetary Policy and Trade, Hearing, “A Legislative Proposal to Impede North Korea’s Access to Finance,” 10:00 AM in 2128 Rayburn House Office Building

THE REGULATORS

Consumer Financial Protection Bureau (CFPB) Arbitration Rule Receives Surprising Support from Right: A poll released on September 7 by the American Future Fund, a conservative super PAC, shows significant support for the arbitration ban in states represented by moderate Republicans. In Ohio and Alaska, more than two-thirds of people polled supported the rule, including a majority of Republicans and individuals who self-identify as "very conservative.” In Louisiana, support for the rule neared 70 percent. In Maine, 65 percent of those polled backed the arbitration rule. Senate Banking Committee Chairman Mike Crapo, however, believes that a repeal measure will still pass the Senate. The House passed the repeal bill in July.

CFPB Director Richard Cordray Seeks to Work with Department of Education: After Department of Education officials sent a letter to the CFPB informing the agency that the department was canceling its agreement to share information related to student loans with the CFPB, Director Cordray on September 7 asked Department of Education Secretary Betsy DeVos to engage in “constructive conversation” that would enable the two sides to work together. According to Cordray, the CFPB has clear authority to perform the Department’s student loan-related oversight.

Effort to Restructure CFPB Losing Steam: The Republican years-long effort to restructure CFPB leadership from a single director to a multi-member commission seems to be losing steam. Additionally, Democrats seem to be losing interest in restructuring as a way to prevent a single director from dismantling the agency. This comes amid speculation that Director Cordray will soon step down to focus on a gubernatorial run in Ohio.

Treasury Targets South Sudanese Government Officials and Related Companies for Continued Destabilization: On September 6, the U.S. Department of the Treasury took multiple actions in response to the continued deterioration of the humanitarian situation in South Sudan and the role of officials of the South Sudanese government in undermining the peace, security, and stability of the country. The Office of Foreign Assets Control (OFAC) designated two South Sudanese government officials and one former official for their roles in destabilizing South Sudan and three companies that are owned or controlled by one of the officials. Additionally, the Financial Crimes Enforcement Network (FinCEN) issued an advisory to financial institutions concerning the potential movement of assets belonging to South Sudanese politically exposed persons.

Federal Reserve Outlines Next Steps for Payment System Improvement: On September 6, the Federal Reserve published Strategies for Improving the U.S. Payment System: Federal Reserve Next Steps in the Payments Improvement Journey, a paper identifying updated tactics it will pursue to help improve the speed, safety, and efficiency of the U.S. payment system. The paper is a follow-up to the Fed's strategic vision, Strategies for Improving the U.S. Payment System, published in January of 2015, which called for the commitment of all payment industry stakeholders to achieve five desired outcomes focused on speed, security, efficiency, international payments, and collaboration.

Report from Housing and Urban Development Finds that People Living with Mental Disabilities Face Significant Rental Housing Discrimination: Persons living with mental illness, intellectual or other developmental disabilities continue to face significant housing discrimination in the rental housing market, according to a new pilot study released on September 5 by the U.S. Department of Housing and Urban Development (HUD). Rental Housing Discrimination on the Basis of Mental Disabilities: Results of Pilot Testing finds that when compared to people without mental disabilities, those persons who are living with mental disabilities receive fewer responses to their rental inquiries, are informed of fewer available units, and are less likely to be invited to contact the housing provider.

NOMINATIONS, COMINGS, AND GOINGS AT THE AGENCIES

President Trump to Nominate Robert Jackson to SEC: President Trump will nominate Robert Jackson to be a Democratic SEC commissioner, the White House announced. Jackson is currently a professor at Columbia Law School.

Federal Reserve Vice Chairman Submits Resignation: On September 6, Stanley Fischer, Vice Chairman of the Federal Reserve, submitted his resignation, effective October 13. He cited “personal reasons” for stepping down. Randal Quarles, whose nomination recently passed out of the Senate Banking Committee, would serve as Fischer’s replacement if confirmed.

SEC Names Chief Litigation Counsel: On September 7, the Securities and Exchange Commission announced that Bridget Fitzpatrick has been named Chief Litigation Counsel of the SEC. David Gottesman will continue to serve as the agency’s Deputy Chief Litigation Counsel. Since December 2016, Fitzpatrick and Gottesman have served as Co-Acting Chief Litigation Counsel. Previously, Fitzpatrick served as a supervisor and a trial lawyer in the SEC’s Enforcement Division.

OTHER NOTEWORTHY ITEMS

Milken Institute Assembles Bipartisan Housing Policy Team: The Milken Institute has assembled an experienced team of housing policy experts that will be led by institute founder Michael Milken and Lewis Ranieri, an expert and pioneer in mortgage derivatives. Also on the team will be Eric Caplan, chairman of a mortgage securitization task force at the Structured Finance Industry Group, and Ted Tozer, Michael Stegman, and Phillip Swagel.

Fintech Company Square Seeking Industrial Bank Charter: Square is following in the footsteps of SoFi and Varo Money as fintech firms that are trying to get more into the traditional lending space. The company announced on September 7 that it is filing an application with Utah’s Department of Financial Institutions to charter an industrial loan company and the Federal Deposit Insurance Corporation for deposit insurance.

Credit Bureau Equifax Hacked: Late on September 7, credit bureau Equifax said it had been hacked. The hack could have possibly exposed the personal information of up to 143 million consumers. Senator Mark Warner (D-VA), a member of the Senate Banking Committee, called the breach “a real threat to the economic security of Americans.” Congress and regulators are investigating the breach.